U.S. District Court Judge Jed Rakoff today overturned the $33 million settlement hammered out between the SEC and BoA over the $3.6 billion in Merrill Lynch bonuses paid to execs just prior to Merrill's merge with BoA. (A deal to pay the bonuses, agreed to in secrecy, without notifying shareholders, allegedly.)
In his ruling, the judge concludes the agreement "does not comport with the most elementary notions of justice and morality...."
"Morality" - a rarely used word in today's business climate.
The judge takes issue with the settlement because it "...proposes that the shareholders who were the victims of the alleged misconduct now pay the penalty for that misconduct."
Which, according to Rakoff, makes such a settlement "neither fair, nor reasonable, nor adequate." Apparently he believes the people who allegedly lied to the shareholders about an extremely costly and secret business deal should be left holding the bag... not the shareholders.
BoA and SEC had argued that bank execs could not possibly be held accountable for following the advice of their lawyers, thus, in their mind, the shareholders should pony up the cash.
Curious what Henry Paulson has to say about this development....
More links follow....
WaPo coverage of the decision
NY Times story
Naked Capitalism's take on the story